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08 February 2013

Start-Up Nation Explodes Economic Myths

Dan Senor and Saul Singer's "Start-Up Nation" Explodes Economic Myths, Promotes Some Too - Forbes: " . . . Back when he was alive, and in his brilliant book The Economy In Mind, Brookes mocked such tax subsidies. As he saw it, in an economy of the mind a company’s most important assets are its people, not plant or equipment. FedEx has airplanes that take goods around the world, but the company’s real assets are the brilliant individuals who organize package delivery on a global scale. Goldman Sachs may have a state of the art building in lower Manhattan, but its success is a function of the bright minds that arrive to work each day. Israel’s modern economic story confirms Brookes’s intellectual economy. Evidence supporting this is billionaire Warren Buffett’s $4.5 billion investment in Iscar, a machine tools company located within easy reach of enemy rockets. Shouldn’t this have fazed Buffett? Not a chance.As Buffett’s biographer, Alice Schroeder, told the authors, “if Iscar’s facilities are bombed, it can go build another plant. The plant does not represent the value of the company. It is the talent of the employees and management, the international base of customers, and the brand that constitute Iscar’s value.” Too bad politicians and economists miss this as they fiddle with the tax code in order to promote production and heavy equipment purchases. Unsurprisingly they get it all backwards. Not Senor and Singer. They write that “missiles, even if they can destroy factories, do not, in Buffett’s eyes, represent catastrophic risk.” People, not equipment are the future of advanced nations. We should remember this the next time our leaders bail out banks (just a collection of talent, the talent would regroup) and car companies. . . . "